SIMPLE YEAR-END TAX MOVES
As the year-end approaches, consider the following tax planning moves in order to lower your 2017 tax bill. The first few suggestions apply to taxpayers that claim itemized deductions on their tax return (this usually applies when you own a home), and the last few are related to investments.
Make An Early Mortgage Payment
Consider an early mortgage payment to claim the additional interest expense as a reduction to your taxable income. For example, a mortgage payment due January 15th of next year can be paid by December 31st. That allows the interest expense for that payment to be deducted on this year’s tax return.
Donate Cash or Property
Charitable donations of cash or property are deductible for those who itemize deductions. So, make a gift to your favorite charity prior to the end of the year. Hold onto those receipts for contributions you make, and keep in mind that any donated property with a value of over $5,000 will require a qualified appraisal.
Sell Stocks or Mutual Funds with Losses
Consider selling stocks or mutual funds to capture investment losses, if they are investments you don’t plan to keep for the long-term. These losses can offset other capital gains or up to $3,000 of other income. Any capital losses above the $3,000 limit may be carried forward to be used in future years.
Increase Retirement Plan Contributions
Increase your 401(k) contributions (or similar employer-sponsored retirement plan) to reduce your amount of taxable income. You can contribute up to $18,000 ($24,000 if you are 50 or older) into your 401(k) account, which reduces your taxable income and defers the tax until the money is used in retirement. Unlike a traditional IRA contribution that can be made through April 17, 2018, your 401(k) contribution will need to be done by year-end in order to be a deductible expense for 2017.
Potentially significant tax savings can be achieved if you complete these tax moves before year-end!